YOU GOT PUNK’D, BAREFOOT! Hoover­ing up Zuck bucks

Did you hear the ru­mour that Face­book is con­sid­er­ing launch­ing its own Bit­coin-in­spired cryp­tocur­rency?

The Sunday Telegraph (Sydney) - - NEWS - SCOTT PAPE

You didn’t? Maybe that’s be­cause you get your news from Face­book, and it just didn’t show up in your feed.

So is it pos­si­ble? Could a so­cial me­dia plat­form re­ally trans­form how we pay for things? Well, think of it like this: in China (where Face­book is banned), every store has a WeChat pay­ment op­tion. What’s WeChat? It’s the Chi­nese ver­sion of Face­book, In­sta­gram, Twit­ter, YouTube, Google. All rolled into one “su­per app”. How­ever, WeChat’s big dumpling is mo­bile pay­ments.

In China you can or­der a meal in a restau­rant, split the bill with your mates, pay your share, and take a photo of your dish to im­press your friends — all on WeChat. The plat­form has over one bil­lion users a day and ac­counts for 3 per cent of mo­bile traf­fic in China. By con­trast, Face­book ac­counts for 14 per cent of mo­bile traf­fic in the US.

Cur­rently, Face­book’s founder, CEO and res­i­dent ro­bot Mark Zucker­berg con­trols what 2.2 bil­lion peo­ple view on their screens every day (with lit­tle over­sight or reg­u­la­tion), and he knows more about you than your mother does.

But it’s not enough. It’s never enough. Just think of all the ex­tra data he could hoover up from track­ing our pay­ments, like WeChat does. Zuck bucks! Still, he’s keep­ing his crypto close to his chest.

Zucker­berg says cre­at­ing an on­line cur­rency is not re­ally on his radar. True dinks.

In fact, he only has what he calls a “small team” on it. Uh-huh.

So who’s lead­ing this small team? A bloke by the name of David Mar­cus, who was last seen run­ning a tiny lit­tle app for Face­book called Mes­sen­ger. And what was he do­ing be­fore that? He was the chief of some tiny lit­tle com­pany called Pay­Pal!

Tread Your Own Path! Hi Scott,

I thought you made some good points last week on try­ing to end the su­per­an­nu­a­tion gravy train. How­ever, the Pro­duc­tiv­ity Com­mis­sion dis­missed your idea last week when it “re­jected a fee­based auc­tion be­cause of the risk funds would pur­sue low-cost strate­gies at the ex­pense of net re­turn”. What say you?

Ken Hi Ken, Yes, I saw that. The Pro­duc­tiv­ity Com­mis­sion re­leased its find­ings into the su­per in­dus­try last week and, un­sur­pris­ingly, they’ve re­ported that the in­dus­try is not very pro­duc­tive.

Cor­rec­tion: they found it’s been su­per-duper pro­duc­tive for the fi­nance in­dus­try, which creams off $32 bil­lion a year from our bal­ances (and their take rises every sin­gle year), but for the aver­age worker? Not so much.

The first thing their re­port pointed out, and rightly so, is that there are too many funds, and too many duds among them. Here’s why this is a prob­lem: if the aver­age 21-year-old gets put into a dud fund (one of the many “un­der­per­form­ers”) they’ll have $635,000 (or 53 per cent) less come their re­tire­ment. That’s the dif­fer­ence be­tween spend­ing your re­tire­ment sip­ping san­gria in Spain or sculling a stub­bie in Shep­par­ton.

As you said Ken, the Pro­duc­tiv­ity Com­mis­sion dis­missed my idea for a cheap­est-fee-wins ten­der. In­stead, they’ve rec­om­mended that an in­de­pen­dent panel choose 10 funds that are “best in show” each year and have peo­ple de­faulted into one of those at the start of their ca­reers. This one has me scratch­ing my head.

Ques­tion: How can any­one choose the best-per­form­ing fund ahead of time? An­swer: They can’t. Re­mem­ber the old say­ing “past per­for­mance is no guar­an­tee of fu­ture results”? It’s ac­tu­ally true!

The Stan­dard & Poor’s long-term SPIVA re­search on fund man­agers has proven that the only cor­re­la­tion with per­for­mance is that the best­per­form­ing funds are more likely to be­come the worst-per­form­ing funds over time!

An­other ques­tion: What hap­pens if you’ve in­vested in a best-in-show fund that gets punted from the top 10 list? An­swer: Who the hell knows? So, what can you con­trol to help you re­tire with dig­nity in a sea of sharks? Two things: 1. Fees. 2. The per­cent­age of your as­sets you’re will­ing to in­vest in the share mar­ket. And un­for­tu­nately there is no one-size-fits-all so­lu­tion for the as­set mix — it’s based on your back­bone. And that’s why I per­son­ally think the Pro­duc­tiv­ity Com­mis­sion should fo­cus on the only thing any­one can con­trol, and the gov­ern­ment can leg­is­late on:

Fees!

WHY AM I PAY­ING A UNION?

Hi Scott,

I was hor­ri­fied to see in The Sun­day Tele­graph an ar­ti­cle by Mi­randa Devine on just how much of our in­dus­try su­per fund money is do­nated to unions, in­clud­ing by Host­plus! They have given $7.5 mil­lion to the United Voice union since 2006. (It’s not just Host­plus ei­ther — Vi­sion Su­per have given $300,000; Aus­tralianSu­per $4.8 mil­lion and Sun­su­per $357,000 over the same pe­riod.)

Have to ad­mit I was shocked — that is my money they are giv­ing away to a po­lit­i­cal party. How does that ben­e­fit the fund? How does it ben­e­fit my re­turns? What might the costs of ad­min­is­ter­ing the fund re­duce to if they were not giv­ing money to a union? Would love to hear your thoughts.

Wendy Hi Wendy,

Here’s how the game is played: In­dus­try funds are con­trolled by unions and em­ployee as­so­ci­a­tions. They have union del­e­gates on their boards, and in most cases their di­rec­tor fees are paid back to the union body, United Voice. The em­ployee as­so­ci­a­tions also have spon­sor­ship agree­ments with the fund. It’s all au­dited and dis­closed to APRA. How­ever, I to­tally agree with you — it’s vi­tally im­por­tant to make sure it’s gen­uinely for ser­vices ren­dered (which they claim), rather your money be­ing used as a slush fund for a po­lit­i­cal party.

On the other hand, most re­tail funds are owned by the banks or AMP, and they charge (on aver­age) dou­ble the fees of in­dus­try funds in or­der to pay a profit back to their share­hold­ers. This is one rea­son in­dus­try funds con­sis­tently out­per­form re­tail funds: the less they take, the more you make.

Ul­ti­mately, the Pro­duc­tiv­ity Com­mis­sion’s find­ings show that most su­per funds are put­ting their own in­ter­est in front of their mem­bers’ in­ter­est. And there’s the rub: I can’t con­trol how any su­per fund spends their money, the only thing I can con­trol is the fees I pay, which is why I have my money in Aus­tralia’s low­est-cost su­per fund.

How­ever, if you don’t like how the sausage is made, don’t eat it. Vote with your feet and move to an­other fund!

‘ WHERE ARE THEY NOW?’

Dear Scott,

One year ago I wrote to you — on the day I found out I was preg­nant. I told you how, af­ter 10 years of be­ing to­gether, I got mar­ried to my part­ner and then dis­cov­ered he had been ly­ing to me all those years and had run up huge debts from on­line spend­ing. You sug­gested he might get some help from Beyond Blue and that we talk about money to­gether at a monthly Barefoot Date Night.

Well, a year on here’s my up­date. I have had a lit­tle girl, and my hus­band has com­pletely turned his life around — I am so proud of him. Telling him that you had called me re­ally res­onated with him, as he re­spects you a lot; it started the turnaround. He then ad­mit­ted he had a prob­lem (af­ter he tried to put it back on me and I wouldn’t have a bar of it) and has not gone back on that.

The calm­ness in the house is amaz­ing, and we have been work­ing to­gether as a team over the past few months. Thank you for your sup­port — it has meant so much to our lit­tle fam­ily. You’re a leg­end!

Kim Hi Kim,

Well done, you (and your hubby) have got this! Good luck for your first year with the baby. I’m on my third now and it doesn’t get any eas­ier (so my wife tells me).

THE BAREFOOT IN­VESTOR HOLDS AN AUS­TRALIAN FI­NAN­CIAL SER­VICES LI­CENCE ( 302081). THIS IS GEN­ERAL AD­VICE ONLY. IT SHOULD NOT RE­PLACE IN­DI­VID­UAL, IN­DE­PEN­DENT, PER­SONAL FI­NAN­CIAL AD­VICE.

Face­book's CEO Mark Zucker­berg.

The Barefoot In­vestor: The Only Money Guide You’ll Ever Need (Wi­ley) RRP $29.95

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